Wema Bank Plc will use the net proceeds of its ongoing N40 billion rights issue to finance ambitious expansion plan aimed at transitioning the bank into a “systemically important bank”.
“Systemically important bank” (SIB) is a general reference to a bank with considerable influence on deposits, loans, reach and other key indices within the financial services sector.
Wema Bank is raising about N40 billion in new equity funds from its existing shareholders through a rights issue of 8.572 billion ordinary shares of 50 kobo each at N4.66 per share to all shareholders on its register as at close of business on Thursday, September 28, 2023.
The rights were pre-allotted on the basis of two new ordinary shares for every three shares held as at the September 28, 2023. After the conclusion, a fully allotted rights will increase the bank’s issued shares by 67 per cent.
In a document obtained at the weekend on the rationale for the N40 billion rights issue, Chairman, Wema Bank Plc, Dr. Oluwayemisi Olorunshola, outlined that the additional capital being sought would be deployed to further grow and scale the bank’s operations as it transitions into a “systematically important bank (SIB).
According to her, the rights issue also provides the bank opportunity to proactively address the planned recapitalisation of the banking industry by the Central Bank of Nigeria (CBN).
CBN Governor, Dr Olayemi Cardoso, had recently said the apex bank would direct banks to increase their capital base, although details of the capital requirements and timeline are still being finalised.
“The rights issue also presents you our esteemed shareholders the opportunity to increase your investments in the bank whilst presenting the bank with the opportunity to position for expansion and prepare for future but imminent recapitalisation directive by the Central Bank of Nigeria,” Olorunshola said.
She said the bank’s objectives in raising additional capital included to improve its capital adequacy ratio, deepen ability to withstand systemic shocks, enable further scaling up of operations without restrictions and improve key financial indicators in transition into a SIB by attaining lower cost of funds and cost to income profile among others.
“The bank shall apply the net proceeds of the rights issue to implement a digital first banking strategy designed to strengthen our push towards becoming a leading digital banking player in Nigeria and beyond. Improve our key financial indicators as we seek to transition into a Systemically Important Bank. Improve our customer experience capabilities to improve our customers’ financial service options and satisfaction levels. Shore up our capital base so as to be better capitalised and well positioned ahead of a potential capital increase by the Central Bank of Nigeria,” Olorunshola stated.
She explained that the bank as a pre-eminent indigenous financial services institution with over 75 years’ operating history, has undergone various stages of repositioning exercises since 2009 which has resulted in significant growth in its brand, operational and financial profile.
“Our bank has been able to grow its total assets from N300 billion to nearly N2 trillion within the 10-year period of raising additional capital in 2013 thus, demonstrating the bank’s aggressive growth strategies and value prospects when further capitalised.
“Furthermore, some of the major milestones achieved by our bank includes the repayment of all its outstanding CBN obligations, a N40 billion recapitalisation to operate as a Regional Bank in 2011, an upgrade to a National Bank in 2015, the launch of ALAT in 2017, the first fully digital bank in Nigeria which has and will continue to be instrumental in driving the bank’s growth and the additional tier 1 capital raised earlier in the year of up to N21 billion which will enhance our bank’s financial stability and provide a buffer against potential losses,” Olorunshola said.
She urged shareholders to pick up their rights as this would help in ensuring that the bank is well positioned to achieve its strategic growth objectives.
